Goliath Enlists David (But Doesn’t Eat Him)

The Relationship between Fortune 500 Companies and Small Consultants Evolves

Can big companies and small consultants work together in ways that are positive for both parties… and ultimately the consumer?

Small, fast-on-their-feet consulting firms bring a host of benefits to the table beyond simply monetary ones.

These small firms are born out of a perceived market need. They are close to their customers, and respond to clients needs with an efficiency and speed that larger firms simply can’t do. Small entrepreneurial organizations are not beholden to the “usual” way of doing things, and make their own rules, spurring innovation. This makes them enticing targets for acquisition by their larger clients.

But, like a greasy cheeseburger that tasted wonderful going down, sometimes these acquisitions cause heartburn and regret later.

Beginning in the 1970’s, large firms began to look to small, entrepreneurial consultants for unique advice, design capabilities, products, and/or talents. More often than not, what started out as a partnership of non-equals ended with the absorption of the smaller company by the Fortune 500.

An example: From its birth in the late 80s, a small, entrepreneurial software company was doing groundbreaking work as a third-party vendor to several Fortune 500s. One of the companies became concerned that the small company’s work was available to the highest bidder and purchased the little company and its talent pool, thereby ensuring that only they had the cool new ideas and technologies.

But, the executives at the Fortune 500 soon became uncomfortable with the processes by which this new group worked — processes radically different from their own. They had no experience with software life-cycles, yet they increased their oversight year after year, saddling the software team with rules, procedures, and managers whose task it was to bring the “rogue” group into confluence with the core business of the mother company. As a result, the company-within-a-company was, at length, unable to do anything groundbreaking. Viewed as a failure, it was “downsized”, its staff laid off, and its work outsourced to — you may have guessed — a third party vendor.

This scenario has been repeated again and again by any number of large corporations and small independents. Lamentably, these mergers most often failed, sucking the vitality out of the resources absorbed from the smaller firm, and resulting in their loss. Often the larger company suffered damage as well, in the form of unmet customer requirements, missed opportunities, and squandered investment.

Why does this happen? Largely it’s a function of the differences between the ways small, entrepreneurial firms and large corporate entities are run.

Large entities often become victims of their own hierarchy — the top execs no longer dabble in the creative process of research and design, nor do they court new ideas from within their own company. Ideas generated at lower levels of the hierarchy rarely work their way up through successive levels of management and “group-think” that occurs when underlings are afraid of offending those higher up with “radical” ideas.

A small firm, on the other hand, has a flatter management structure, and the company’s executives are involved with gathering customer requirements, designing means of meeting them, implementing them, and engaging in a continuing dialogue with the customer as they are rolled out.

In the newly emerging model, David and Goliath work together as separate partners. This allows David to maintain his autonomy and quickness, while Goliath doesn’t have to pay for the overhead inherent in design and development — staff salaries, software and hardware, and the like.

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